Atty. Sabino Padilla, Jr.

July 3, 1992 Atty. Sabino Padilla, Jr. Padilla Law Office 7th Floor, Padilla-De Los Reyes Bldg. 232 Juan Luna Street, 1006 Manila S i r : This refers to your letter of April 21, 1992 on behalf of your client, the Catholic Bishops Conference of the Philippines, requesting re-consideration of the SEC Policy requiring "corporation sole" to submit General Information Sheet and Financial Statements, submitting the following grounds to support such request summarized as follows: 1. That the requirements of Section 141 of the Corporation Code applies only to corporations lawfully "doing business" in the Philippines. A " corporation sole ",which exists only to administer the properties and temporalities of a church or denomination, does not " do business " as contemplated by the above provision, as the term "doing business" means the carrying on of the operations of the corporation, or some portion of them, in the usual and regular course of the prosecution of the corporate enterprise "for profit" ; 2. That Section 141, which is a general provision, does not apply to corporations sole since they are considered special corporations. Neither Title XI which deals with "non-stock corporations" nor Title XIII which deals with religious corporations contain the requirement that corporation sole must submit General Information Sheet and Financial Statements; 3. That the reason for the submission of the General Information Sheet and Financial Statements which is to allow the monitoring or checking of the operations and activities of corporations does not exist in the case of corporations sole. The corporations sole referred to in the letter are accountable only to the Supreme Pontiff in Rome, and the Roman Catholic Church has its own laws, rules and regulations relating to the administration of church properties. The very concept of a corporation sole which consists of only one member, who is the incumbent bishop of a diocese or the incumbent superior of a religious congregation or order, shows that there is no membership to which the incumbent bishop or superior is accountable; and 4. That a corporation sole is merely the administrator or manager, a trustee, of the properties and temporalities of the owner, which in this particular case is the Roman Catholic Church. Therefore, there is actually nothing for it to report to the SEC, unless the intention is to require the same to report on the properties and temporalities of the Roman Catholic Church. The report requirement, however, would be an unwarranted usurpation of power since the Roman Catholic, although a juridical person, has never incorporated itself in the Philippines. The Corporation Code of the Philippines provides: "SECTION 141. Annual report of corporations . Every corporation, domestic or foreign, lawfully doing business in the Philippines shall submit to the Securities and Exchange Commission an annual report of its operations together with a financial statement of its assets and liabilities, certified by any independent certified public accountant in appropriate cases, covering the preceding fiscal year and such other requirements as the Securities and Exchange Commission may require. Such report shall be submitted within such period as may be prescribed by the Securities and Exchange Commission." (Emphasis supplied) The term " doing business " in the above-cited provision should not be construed as referring only to corporations which undertake economic business activities. A corporation (stock or non-stock, non-profit),may be deemed to be "doing business" when it engages in the exercise of its corporate purposes. Thus, while non-stock, non-profit corporations, including corporation sole, by their very nature do not undertake economic business ventures, they are considered doing or transacting business in the carrying out of the purpose(s) for which they were organized. While under the Corporation Code corporations sole are primarily governed by Title XIII, Section 109 thereof provides that religious corporations shall also be governed by the provisions of Title XI relative to nonstock corporations which provides that " the provisions governing stock corporation, when pertinent, shall be applicable to non-stock corporations, except as may be covered by specific provisions of the Title " (Section 87). Since there is no specific provision relative to reportorial requirements for non-stock corporations under Titles XI and XIII of the Corporation Code, the above-quoted general provision of the Corporation Code is applicable. Thus, to implement the aforecited provision, the SEC promulgated the Rules Requiring Non-Stock Corporations to Keep Accounting Records and to Submit Annual Financial Statements. Said Rules provide: "In order to enable the Securities and Exchange Commission to closely supervise and properly monitor the operations and activities of non-stock corporations for the purpose of protecting the membership participation therein as well as the interest of the public in general, all non-stock corporations ,duly registered with the Commission are hereby required to keep proper accounting records and to prepare and submit to the Commission their annual financial statements ,consisting of a balance sheet and income statement in accordance with the following provisions: 1. The annual financial statement of non-stock corporations must be submitted to the Commission within 120 days for corporations whose securities are not registered and 105 days for corporations whose securities are registered after the end of their fiscal year. ..." (Emphasis supplied) The aforecited Section 141 of the Corporation Code and SEC Rules therefore, make the submission of annual financial statements mandatory to all non-stock corporations, including corporations sole. However, as to the required General Information Sheet, since a corporation sole consists of only one person who is the trustee of the properties of the religious denomination, report on the election of directors and/or officers is not necessary. Therefore, corporations sole may only be required to submit a modified General Information Sheet. The fact that under Section 110 of the Corporation Code, a corporation sole is merely the " administrator " of the church properties that come to his possession and which will be held in trust for the church or religious denomination which he represents, there is more valid reason to impose the above questioned reportorial requirements in order to protect the interest of the members of the church or religious denomination or public, who in one way or another, may have given contributions, donations, grants, etc. As to your claim that there is no reason to monitor or check the operation and activities of corporations sole, as they are accountable only to the Supreme Pontiff of Rome and the Roman Catholic Church has its own laws, rules and regulations to govern the administration of the Church properties, they should not have registered with the Commission if they do not want to be regulated by this Office. An association or organization which is not engaged in economic business activities and not desirous of acquiring juridical personality need not be registered with the Commission. In registering with the SEC, they impliedly agree to become subject to pertinent Laws and Rules and Regulations implemented by the Commission and are deemed to have notice of these laws, rules and regulations. In view of the foregoing, the Commission, in its meeting of July 2, 1992, resolved to deny your request for reconsideration. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman